01—Abstract
Summary
Summary of the 10-K filed March 3, 2003. Cited figures are marked; the original filing is the authoritative source.
NiSource Inc. is an energy holding company whose subsidiaries provide natural gas, electricity and other services to approximately 3.7 million customers in a corridor from the Gulf Coast through the Midwest to New England.
For 2002, the company reported net income of $372.5 milliona, or $1.77 per basic share, up from $216.2 million, or $1.05 per share, in 2001. Income from continuing operations rose to $425.7 million, or $2.02 per share, compared with $226.4 million in 2001. Gross revenues fell to $6,492.3 million from $9,461.0 million, largely because the company scaled back merchant and trading operations, and operating income rose to $1,202.7 million from $1,032.9 million.
The company's balance sheet improved during 2002. A November 2002 equity offering of 41.4 million shares raised net proceeds of approximately $734.9 millionb, which was used to reduce debt. Long-term debt declined to $5,018.0 million from $6,301.5 million, and short-term borrowings fell to $913.1 million from $1,854.3 million.
Management stated that additional balance sheet improvement measures may be necessary to secure a ratings upgrade or improve the current ratings outlook, and that Moody's downgraded NiSource and NiSource Finance senior unsecured debt to Baa3 in February 2002. The company also exited the telecommunications business, sold its water utilities for $540.0 millionc, and sold its interest in a New York exploration and production joint venture for approximately $95.0 million in January 2003.
Key risks include pending regulatory and environmental matters, the Primary Energy project financings and guarantees, and the Whiting Clean Energy dispute with its contractor. Pension expense for 2003 is expected to rise $42.8 milliond, and the company plans to refinance approximately $1.2 billion of expiring long-term debt during 2003.
02—Key points
Key Highlights
- Net income of $372.5 million, or $1.77 per basic share, in 2002, compared with $216.2 million, or $1.05 per share, in 2001
- Income from continuing operations of $425.7 million, or $2.02 per share, versus $226.4 million, or $1.10 per share, in 2001
- Operating income of $1,202.7 million, up from $1,032.9 million, while gross revenues declined to $6,492.3 million from $9,461.0 million
- November 2002 equity offering of 41.4 million shares netted approximately $734.9 million, used to reduce debt
- Long-term debt reduced to $5,018.0 million from $6,301.5 million; short-term borrowings reduced to $913.1 million from $1,854.3 million
- Moody's downgraded NiSource and NiSource Finance senior unsecured debt to Baa3 in February 2002; management says further balance sheet improvement may be needed to secure an upgrade
- Plans to refinance approximately $1.2 billion of expiring long-term debt during 2003, and expects 2003 pension expense to rise $42.8 million
03—Questions
Frequently Asked Questions
Why did revenue fall while earnings rose?
Gross revenues declined to $6,492.3 million from $9,461.0 million mainly because NiSource scaled back merchant and energy trading operations, sold non-core businesses, and exited telecommunications. Operating income still increased to $1,202.7 million, helped by the end of goodwill amortization, which the filing says contributed $93.1 million to operating income in 2002.
How did NiSource strengthen its balance sheet in 2002?
The company completed a November 2002 equity offering that raised about $734.9 million for debt reduction, sold its water utilities for $540.0 million, and reduced short-term borrowings. Long-term debt fell to $5,018.0 million from $6,301.5 million.
What are the main risks to investors mentioned in the filing?
The filing cites ratings-trigger collateral requirements, Moody's downgrade with a negative outlook, pending litigation including Grynberg and Price royalty cases, environmental compliance costs such as NOx reduction capital of $200 to $250 million, and disputes at Primary Energy's Whiting Clean Energy and Portside projects.
What happened with the Millennium Pipeline project?
The FERC issued final certificate authority in September 2002, but construction may not begin until Canadian and other approvals are received. New York's Department of State determined the project was not consistent with the Coastal Zone Management Act, and Millennium appealed to the U.S. Department of Commerce.
What dividend did NiSource pay and what is its dividend outlook?
NiSource paid quarterly common dividends of $1.16 per share during 2002. In January 2003 the Board declared a quarterly dividend of 29 cents per share, payable February 20, 2003, and stated it intends to continue regular quarterly dividends, though the amount depends on earnings, financial condition and other factors.
04—Continue